ZEGONA TO ACQUIRE TELECABLE DE ASTURIAS FOR EU640M

RNS Number : 1000U

Zegona Communications PLC

27 July 2015

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, OR ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA (OTHER THAN THE UNITED KINGDOM) OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

ZEGONA COMMUNICATIONS PLC

ZEGONA TO ACQUIRE TELECABLE DE ASTURIAS S.A. FOR €640M FROM THE CARLYLE GROUP & LIBERBANK

ZEGONA'S FUNDRAISING BACKED BY GLOBAL EQUITY INVESTORS

Zegona, a company established to acquire and operate businesses in the European Telecommunications, Media and Technology (''TMT'') sector, announces that it has reached agreement with global alternative asset manager, The Carlyle Group (NASDAQ: CG) and Liberbank, to acquire Telecable de Asturias S.A. the leading quad play telecommunications operator in Asturias, North West Spain, for an enterprise value of €640m.

Zegona will fund the acquisition with a combination of £251m of new equity, backed by global institutional investors, funds from Zegona's recent IPO and a new debt facility arranged by Goldman Sachs. The transaction is expected to close by mid- August 2015.

Commenting on the acquisition, Zegona Chief Executive Eamonn O'Hare said: "There is a significant opportunity to continue the impressive development of the Telecable business. By combining the local knowledge of the team in Spain with the international experience and track record of Zegona, we have the right leadership to drive Telecable forward and deliver its full potential."

"Telecable fits the bill in terms of our reasons for launching Zegona as it is a strategically strong business with considerable opportunity for top line growth and returns. It is also a regional champion underpinned by an extensive high speed fibre network. Our intention is to fully utilize the power of this network in order to differentiate ourselves and offer great value to customers. By leveraging our Virgin Media heritage, we will make Telecable a fierce competitor which delivers for customers and shareholders."

Alejandro Martínez Peón, CEO of Telecable added: "This is a landmark day for Telecable as we become part of a dynamic, expanding listed entity on the London Market supported by very experienced industry sponsors who have a strong track record of growth and value creation. Zegona has the right capital structure in place to continue our Company's growth and to cement our leadership position in the Spanish telecommunications market. After a period of continued growth supported by The Carlyle Group and Liberbank I firmly believe that this is the right step to reinforce Telecable's competitive position, bringing us a better future."

Alex Wagenberg, Managing Director at Carlyle Europe Partners said: "It has been a real pleasure to work with the team at Telecable and our partners at Liberbank over the past four years. Despite the challenging economic climate, we worked tirelessly with the superb management team. This ensured they delivered consistent year-on-year growth in terms of revenues, EBITDA, market penetration, while maintaining their technological and service leadership and minimal customer turnover. We also leveraged Carlyle's in-depth know-how and scale with regard to the telecommunications and cable sector which was a key factor in creating value for our investors and for the Company's continued success."

Goldman Sachs International acted as exclusive financial advisor to Telecable, The Carlyle Group & Liberbank.

J.P. Morgan Cazenove acted as joint bookrunner and joint broker, BNP Paribas acted as M&A financial adviser, Oakley Capital acted as joint bookrunner and Cenkos Securities was joint bookrunner and is Nominated Adviser and joint broker.

Goldman Sachs acted as bookrunner of the term loan facility which will be provided by the Merchant Banking Division of Goldman Sachs. BNP Paribas acted as bookrunner of the revolving credit facility and is agent of the debt facilities.  

Enquiries:

Cenkos Securities plc (Nominated Adviser, Joint Broker and Joint Bookrunner)

Tel: [phone]

Ian Soanes / Elizabeth Bowman

J.P. Morgan Cazenove (Joint Bookrunner and Joint Broker)

Tel:  [phone]

Nicholas Hall / Salma Kalisvaart / Charlie Walker / Edward Digby

Oakley Capital Limited (Joint Bookrunner)

Tel:  [phone]

Chris Godsmark / Christian Maher / Victoria Boxall

Tavistock (Public Relations Adviser to Zegona)

Tel: [phone]

Matt Ridsdale / Lulu Bridges / Mike Bartlett

The Carlyle Group

Catherine Armstrong - Media Relations Manager

Tel: [phone]

Email: [e-mail]

The Carlyle Group-Spain

Kreab (Public Relations Adviser)

Tel: [phone]

Carmen Basagoiti / Oscar Torres

Email: [e-mail] / [e-mail]

NOTES TO EDITORS:

Background to Carlyle and Liberbank ownership of Telecable

Carlyle acquired 85% of the Company in December 2011 from Liberbank which recommitted retaining a 15% minority interest in the Company. Despite challenging macro-economic conditions and through the ongoing support of its investors Telecable has delivered sustained growth in revenues, profitability, cashflow, market penetration and continued investment in new technologies. The Company has become a hallmark Spanish telecommunications and cable operator.

About Zegona

Zegona was established to acquire and operate businesses in the European Telecommunications, Media and Technology (''TMT'') sector, focusing on network-based communications and entertainment opportunities. Investments will target strategically sound businesses that require active change to realise full value, creating significant long-term returns through fundamental business improvements. Zegona was established with the support of Marwyn (the buy and build specialist that backs proven management teams) as a core investor, and other leading institutions. www.zegona.com

About Telecable

Founded in 1995, Telecable is a TV, fixed and mobile telephony, broadband and advanced business solutions provider for the Asturias region in northern Spain. With more than 162,000 residential and corporate customers, the Company had revenues of €131 million and EBITDA of €63 million in 2014. Headquartered in Oviedo, Alejandro Martínez Peón is the Company's CEO. www.telecable.es 

About Carlyle 

The Carlyle Group (NASDAQ: CG) is a global alternative asset manager with $193 billion of assets under management across 130 funds and 156 fund of funds vehicles as of March 31, 2015. Carlyle's purpose is to invest wisely and create value on behalf of its investors, many of whom are public pensions. Carlyle invests across four segments - Corporate Private Equity, Real Assets, Global Market Strategies and Investment Solutions - in Africa, Asia, Australia, Europe, the Middle East, North America and South America. Carlyle has expertise in various industries, including: aerospace, defense & government services, consumer & retail, energy, financial services, healthcare, industrial, real estate, technology & business services, telecommunications & media and transportation. The Carlyle Group employs more than 1,650 people in 40 offices across six continents. www.carlyle.com

About Liberbank

Liberbank is the eighth largest bank listed on the Spanish stock exchange, established in 2011 following the integration of Grupo Cajastur, Caja de Extremadura and Caja Cantabria. The bank, with almost two million customers, operates under the brand name Liberbank in the financial markets and in its sales network and has more than 1,000 offices. Liberbank has presence at a national level, and it is in a leading position in the retail markets of Asturias, Cantabria, Castilla La Mancha and Extremadura.  www.liberbank.es

BACKGROUND TO THE TRANSACTION

The Board of Zegona has reached agreement on the terms of a transaction to acquire the Telecable Group of companies from Carlyle, Liberbank and certain members of Telecable management (the "Vendors").  The Company proposes to acquire the Telecable Group for cash and share consideration at a value of €640 million on a debt-free, cash-free basis.  The consideration will be funded from the proceeds of the Placing of approximately £251 million, the existing cash balances of the Company, a new term loan of approximately €270 million and the issue of the Consideration Shares.

Owing to its size, the Acquisition is classified as a reverse takeover under the AIM Rules for Companies and the Acquisition and the Placing require the approval of Shareholders. Accordingly, the General Meeting has been convened for 11.00 a.m. on 13 August 2015 at 10 Gresham Street, London, EC2V 7JD.  The Circular describing the Proposals will be sent to Shareholders today.  It is expected that the Acquisition will become effective on 14 August 2015.

The Company has published an Admission Document containing information on the Enlarged Group and will be made available on the Company's website www.zegona.com today.

STRATEGY

Zegona was established with the objective of acquiring businesses in the European Telecommunications, Media and Technology sector with a 'Buy-Fix-Sell' strategy to deliver attractive shareholder returns. The Directors have now identified an attractive opportunity to acquire Telecable which the Directors believe represents a compelling investment because of, among other factors, Telecable's market leading position and strong cash generation, coupled with attractive dynamics in the Spanish Telecommunications Market and Spanish economy more broadly. 

Upon Completion, the Company will cease to be regarded as an investing company for the purpose of the AIM Rules, and it will cease to have a formal investing policy.

The Company's strategy will continue to be to seek to provide Shareholders with an attractive total return, primarily through appreciation in the value of the Company's assets. The Directors believe that opportunities exist to create significant value for Shareholders through a properly executed 'Buy-Fix-Sell' strategy being applied to selected assets within the European, network-based communication and entertainment services sector. The Acquisition is the first such opportunity identified by the Directors.

The Directors consider the Acquisition to be consistent with the Company's strategy. Although the enterprise value of Telecable is lower than the £1 to 3 billion range described at the time of the Initial Admission, the Directors intend to make further acquisitions which the Directors believe could create a combined business with an enterprise value in the range of £1 to 3 billion.

INFORMATION ON THE ENLARGED GROUP

Information on Telecable

Telecable is the leading ''quad-play'' telecommunications operator in the Spanish region of Asturias, with more than 164,000 customers as of 31 December 2014, offering television, broadband internet, mobile telecommunications and fixed-line telecommunications services to residential and business customers.

Telecable is the leading cable operator in Asturias and has installed over 2,400 kilometres of fibre optic cable and 2,600 kilometres of coaxial cable, with more than 450,000 homes passed in 44 municipalities in Asturias. Telecable complements its own network with a network provided by the Principado de Asturias that enables it to offer fibre optic services to approximately 43,000 homes in rural areas of Asturias. As of 31 December 2014, Telecable was the Asturias region's leading ''quad-play'' residential telecommunications operator, being the largest provider of pay television and broadband services and the second and fourth largest fixed-line and mobile telecommunications provider respectively.

For the year ended 31 December 2014, Telecable generated revenues of €130.9 million, Adjusted EBITDA of €62.9 million and Adjusted EBITDA margin of 48.1 per cent and Telecable's loss for the year was €7.0 million.  The net liabilities of Telecable as at 31 December 2014 were €25.1 million. 

Business Segments Served by Telecable

Residential segment

As of 31 December 2014, Telecable had approximately 145,000 residential customers, representing 88.1 per cent. of Telecable's total customer base and €97.7 million, or 74.6 per cent., of Telecable's total revenues for 2014.

Residential customers are offered the opportunity to subscribe to bundled packages for combinations of multiple services, provided that in order to access any fixed-line telecommunications services they must subscribe to Telecable's television service. Telecable actively promotes subscriptions to more than one service, and its bundled packaging and pricing are designed to encourage customers to purchase multiple services by offering incentives to customers who subscribe to two or more products as well as providing the convenience of having a single supplier and a single point of contact and billing for such services.

Small office / home office segment (''SOHO'')

Telecable's SOHO customers comprise companies of five or less employees. For the year ended 31 December 2014, Telecable's SOHO customers totalled 16,150, representing 9.8 per cent. of Telecable's total customer base and €12.5 million, or 9.5 per cent., of Telecable's total revenues. SOHO customers can subscribe for any product mix irrespective of whether they contract for Telecable's television service.

Enterprise segment

Telecable's enterprise customers include larger corporations and companies with more than five employees. For the year ended 31 December 2014, Telecable had 3,454 enterprise customers, representing 2.1 per cent. of its total customer base and €20.2 million, or 15.4 per cent., of its total revenues.

Telecable offers its enterprise customers customised products, including fixed-line and mobile telecommunications, broadband, data services, multiple lines, online back-up services, hosting services, virtual private networks and Ethernet services.

Strategy

The Directors have the following strategy for value growth in the Enlarged Group:

·     strengthen the product offering, particularly within television and mobile, providing a foundation for up-selling and greater bundling of services to customers;

·     grow revenues in the enterprise division (B2B) by serving larger corporations (in addition to Telecable's existing customer base) and through delivering more advanced data-orientated products; and

·     realise productivity gains by optimising Telecable's mobile access agreement, enhancing procurement and investment focus.

ENLARGED GROUP MANAGEMENT AND GOVERNANCE

Board of Directors

With effect from Completion, the Enlarged Group will be led by a management team comprising the existing directors of the Company, Eamonn O'Hare, who will be Chairman and Chief Executive Officer, Robert Samuelson, who will be Chief Operating Officer, and Mark Brangstrup Watts who will be a non-executive director. An additional independent non-executive director will be appointed prior to Admission and a further independent non-executive director will be appointed within three months of Admission.

Eamonn O'Hare was a director of Virgin Media Inc. from December 2010 until June 2013 and was Virgin Media's Chief Financial Officer from November 2009 until June 2013.  Prior to joining Virgin Media, Eamonn served as the chief financial officer for the UK division of Tesco plc from 2005 to 2009.

Robert Samuelson was the Executive Director Group Strategy of Virgin Media Inc. from January 2011 to January 2014.  Prior to Virgin Media, Robert was a Managing Partner at Virgin Group, heading the Telecoms & Media Sector, with global responsibility for developing Virgin's telecommunications and media businesses.

Mark Brangstrup Watts founded Marwyn, the asset management and corporate finance group, in 2002 with James Corsellis.  Mark is joint managing partner of Marwyn Capital LLP, which provides corporate finance advice, and Marwyn Investment Management LLP, which provides asset management solutions and investment advisory services.  He is also a director of Marwyn Asset Management Limited, a regulated fund manager.

Senior Managers

The Board will be supported in its management of the Enlarged Group by an experienced team of

senior managers:

Howard Kalika - Director of Operations and Chief Financial Officer of Zegona

Howard Kalika was Director, Strategy at Virgin Media Inc. from 2008 to 2013, where he was responsible for the development of Group Strategy including the identification, evaluation and implementation of Group M&A activity. During his time at Virgin Media, he was a member of the core team that implemented the U.S. $24 billion sale to Liberty Global in 2013, and was the finance lead in the sale of VMTV and UKTV. Prior to joining Virgin Media, Howard was Group Vice President, M&A at TransUnion from 2006 to 2008, and previously was chief financial officer of NTL UK (predecessor company to Virgin Media).

Alejandro Martinez Peón - Chief Executive Officer of Telecable

Alejandro joined Telecable in 2009 as chief executive officer, leading Telecable during a period of severe economic crisis with an increasingly challenging competitive situation. He helped accelerate the growth profile of the Telecable business and was involved in its sale to The Carlyle Group in December 2011. Since that time, Alejandro has led Telecable as it has grown and strengthened. Prior to joining Telecable, Alejandro worked for Telefónica from 2000 to 2009 carrying out several managerial roles both in subsidiary operators and in Telefónica Corporation. During 2000, as the Telefónica Móviles Group Financial Controller, he helped in the creation of this group and was involved in its initial public offering in November 2000. From 2001 to December 2003, he was the Marketing VP of Telefónica México. In 2004 he was appointed to the Telefónica Móviles Corporation as Head of Operations, being involved in the acquisition and take-over of the BellSouth subsidiaries in ten Latin American countries for an enterprise value of US$5 billion. From 2006 to 2009, he held a number of sales and commercial roles in Telefónica España.

Javier Cañete - Chief Financial Officer of Telecable

Javier Cañete began working in the Telecable Group in 1995, participating in the launch of Telecable together with most of the organisational activities undertaken to reinforce Telecable's growth in its early years. In 1997, he was appointed as chief financial officer of Telecable. His responsibilities include human resources, administrative and financial activities, and he implemented Telecable's current strategy for human resources, policies and procedures, and planned and implemented outsourcing arrangements and internal functions to develop Telecable's business. Javier was also responsible for implementing quality systems in Telecable, which was required by SETSI, improving the quality of the service perceived by customers, which assisted in achieving lower churn rates for Telecable and increasing the customer life value.

Jesús Pérez - Strategy, Products and Services Director of Telecable

Jesús Pérez is the Strategy, Products and Services Director of Telecable, a position he has held since 2010. As such, he is responsible for filling the role of chief technology officer, developing new products and services, and the monitoring, coordination and reporting of the key initiatives and strategic projects to be developed and promoted within the Telecable Group, in order to meet and improve upon the yearly business plan. Prior to assuming his current role, Jesús was Technical Director at Telecable from 1996 to 2010, and helped to develop and configure Telecable as a global telecommunications operator. He led the selection and implementation of technology and services, engineering, deployment, installation and operations. In the period from 2005 to 2008, Jesús was also Director of IT Systems, and responsible for the creation of the new IT Systems area in Telecable. Prior to joining Telecable, Jesús was a Senior Manager in Arthur Andersen Consulting (later Accenture), from 1989 to 1996, and led and participated in several strategic consultancy projects relating to the design and implementation of systems and processes in banks, insurance companies, utilities and telecommunications operators.

CORPORATE GOVERNANCE

The Directors recognise the importance of sound corporate governance commensurate with the size of the Enlarged Group and the interests of the Shareholders. As far as practicable, the Directors intend to comply with the QCA guidelines for small and mid-size quoted companies. The Board will appoint an independent non-executive director prior to Admission and a second independent non-executive director will be appointed within three months following Admission.

THE TERMS OF THE ACQUISITION AND THE PLACING

The Acquisition

Pursuant to the Share Purchase Agreement, the Company has conditionally agreed, through its subsidiary, Bidco, to acquire the entire issued share capital of Telecable Capital Holding S.L.U., including certain tax credits and the non-controlling interests in Telecable de Asturias S.A. not owned by Telecable Capital Holding S.L.U. The Acquisition values Telecable, including the tax assets, at €640 million on a debt-free, cash free basis. The total consideration payable for the equity in Telecable is €369 million and net debt of €271 million is being repaid.  Of the equity consideration, €361 million will be paid in cash to the Vendors and €8 million will be satisfied through the issue of Consideration Shares valued at £1.50 each to certain Vendors.

The cash consideration of €361 million and the repayment of Telecable's net debt of €271 million will be funded from the proceeds of the Placing, the Company's existing cash resources and the Company's new term loan facility.

As the Acquisition is classified as a reverse takeover under the AIM Rules, the Share Purchase Agreement is conditional on the consent of Shareholders being given in general meeting. Accordingly, the Share Purchase Agreement is conditional (among other things) on the passing of the Resolution at the General Meeting and the Circular will be sent to Shareholders today convening the General Meeting to seek Shareholders' approval of the Resolution. The Directors have received irrevocable undertakings to vote in favour of the Resolution from Shareholders holding 78.7% per cent. of the Existing Ordinary Shares.

The Placing

The Placing Shares have been conditionally placed with institutional investors pursuant to the terms of placing letters and the Subscription Agreement. The Placing has been underwritten by J.P. Morgan Cazenove.

Subject to the Placing Agreement becoming unconditional, the Placing is expected to raise approximately £251 million (approximately £242 million net of expenses incurred in connection with the Placing) for the Company through the issue of 167,326,724 Placing Shares at £1.50 per share. Shortly following Admission of the Placing Shares, expected on 14 August 2015, 3,718,236 Consideration Shares are expected to be issued to the Vendors. Following issue of the Consideration Shares the Company will have 196,044,960 shares in issue.

The Placing, Acquisition and Admission are subject to the satisfaction of certain conditions contained in the Placing Agreement which include (among other things) the passing of the Resolution by Shareholders at the General Meeting and Completion. Should Shareholder approval of the Resolution not be obtained at the General Meeting, none of the Acquisition, the Placing or Admission will proceed.

The Placing Shares will represent approximately 85.4% per cent. of the Enlarged Share Capital following Admission. The Placing Shares will, upon issue, be credited as fully paid and will rank in full for all dividends and other distributions thereafter declared, made or paid and otherwise pari passu with the Existing Ordinary Shares.

As the allotment and issue of the Placing Shares would exceed the Directors' existing authorities to allot Ordinary Shares for cash on a non pre-emptive basis, the Resolution also seeks Shareholders' approval to grant new authorities to enable the Directors to complete the Placing.

Application will be made to the London Stock Exchange for the Enlarged Share Capital being the  25,000,000 existing shares in issue plus the 167,326,724 Placing Shares to be admitted to trading on AIM. It is expected that Admission of the Enlarged Share Capital will be effective and that dealings in the Ordinary Shares will commence on 14 August 2015. Application will be made for the 3,718,236 Consideration Shares to be admitted to trading on AIM and it is expected that admission will become effective on 17 August 2015.  On Admission, following the issue of the Placing and Consideration Shares approximately 37.0 per cent. of the enlarged share capital will not be in public hands.

The Acquisition is conditional on the completion of the Placing and Admission and will not take place if the Placing and Admission does not complete. The Placing will complete on Admission.

In the case of Placees requesting Placing Shares in uncertificated form, it is expected that the appropriate stock accounts of Placees will be credited on or around 14 August 2015. In the case of Placees requesting Placing Shares in certificated form, it is expected that certificates in respect of the Placing Shares will be despatched by post by 26 August 2015.

The Vendors who receive Consideration Shares will enter into lock-in deeds in respect of those Consideration Shares with the Company pursuant to which they shall agree not to dispose of any interest in (i) 40 per cent. of their respective Ordinary Shares for a period of 6 months following Admission; and (ii) the remaining 60 per cent. of their respective Ordinary Shares for a period of 12 months following Admission, except in certain limited circumstances.

DEBT FINANCING

On 25 July 2015, Bidco entered into a senior secured loan agreement  with, among others, Goldman Sachs International as the mandated lead arranger, the bookrunner and the original term loan lender and BNP Paribas as the agent, security agent and the revolving facility lender, into which Telecable de Asturias, S.A. accedes as the borrower upon Completion and pursuant to which a term loan will be made available to Telecable. Bidco intends that an amount of approximately €270 million will be drawn down under the term loan. The Loan Agreement also includes a revolving credit facility in the initial amount of €20 million. It is expected that the Enlarged Group will have a net debt of approximately €250 million.

USE OF PROCEEDS

The gross proceeds of the Placing are expected to be approximately £251 million (approximately €355 million). In addition, the Company expects to draw down approximately €270 million under the Loan Agreement.

This new funding of approximately €625 million in aggregate, along with cash from the Company's own resources of approximately £20 million (approximately €29 million) will be used to fund the cash element of the consideration payable to the Vendors of €361 million, repayment of net indebtedness and other liabilities owed by the Telecable Group of approximately €271 million, and other transaction related costs equivalent to approximately €22 million that require settlement on completion.  Approximately a further €10 million of other transaction relation costs will be settled following Completion.

CURRENT TRADING OF THE ENLARGED GROUP

Since 31 March 2015, the Telecable Group has continued to perform broadly in line with its expectations for 2015, with no significant variations in key financial or operating metrics.

Excluding costs associated with the acquisition of the Telecable Group, the Company's costs have been in line with expectations since its Initial Admission.

The Directors are confident about the prospects of the Enlarged Group going forward, and expect that it is well placed to implement the strategies identified by the Directors to continue to grow the business.

DIVIDEND POLICY

Following Completion, the Company is targeting a dividend on its Ordinary Shares of 4.5p per Ordinary Share in 2016, equivalent to a 3 per cent. yield on the Placing Price. It is anticipated that the first dividend payment will be an interim dividend for the six months to 30 June 2016, which will be paid in the third quarter of 2016. This is a target, not a forecast, and there is no guarantee that this return will be made. Thereafter, the Company intends to implement a progressive dividend payment policy.

The Company will principally depend on dividends received on shares held by it in its operating subsidiaries, interest on intercompany loans provided to its subsidiaries, or receipts from the future disposal of assets, in order to pay dividends to its shareholders. Payments of such dividends (including the targeted 4.5p per Ordinary Share dividend in 2016) will be dependent on the availability of any dividends or other distributions from such subsidiaries, or the successful completion of such disposals, and will be subject to the limitations on dividends set out in the Loan Agreement. The Company can therefore give no assurance that it will be able to pay dividends going forward or as to the amount or timing of such dividends, if any.

RELATED PARTY TRANSACTION

Marwyn Value Investors LP and Fidelity Worldwide Investment are considered related parties of the Company under the AIM Rules. Their participation in the Placing is considered a related party transaction and the Independent Directors consider, having consulted with the Company's Nominated Adviser, Cenkos Securities plc, that the terms of the Placing are fair and reasonable insofar as its shareholders are concerned.

GENERAL MEETING

The Proposals require Shareholders' approval of the Resolution. Notice of a General Meeting of the Company to be held at 11.00 a.m. on 13 August 2015 at 10 Gresham Street, London, EC2V 7JD is set out at the end of the Circular, at which the Resolution will be proposed, a summary of which is set out below. The full text of the Resolution is set out in the Notice of General Meeting at the end of the Circular.

The Company has received irrevocable undertakings to vote in favour of the Resolution in respect of 19,678,797 Ordinary Shares representing 78.7% in aggregate of the Existing Ordinary Shares.  In addition the Company has received voting undertakings to vote in favour of the Resolution.

Shareholders should note that if the Resolution is not passed, the Proposals will not proceed and the Acquisition and the Placing will not be completed in which event the Company will continue to pursue its strategy of identifying acquisition targets.

The Resolution

The Resolution is a special resolution. The Resolution is a composite resolution to, inter alia:

·     approve the Acquisition; and

·     provide all of the authorities necessary to issue the New Ordinary Shares and to implement the Placing;

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Publication of the Admission Document and the Circular	27 July 2015
Latest time and date for receipt of Forms of Proxy	11.00 a.m. on 11 August 2015
Record date for General Meeting	6.00 p.m. on 11 August 2015
General Meeting	11.00 a.m on 13 August 2015
Completion of the Acquisition	14 August 2015
Issue of Placing Shares, re-admission of the Enlarged Share Capital on AIM and dealings commence in the Enlarged Share Capital on AIM	8.00 a.m. on 14 August 2015
CREST stock accounts credited in respect of Placing Shares in uncertificated form	8.00 a.m. on 14 August 2015
Issue of Consideration Shares(1)	14 August 2015
Dealings commence in Consideration Shares on AIM	8.00 a.m. on 17 August 2015
Share certificates in respect of Placing Shares despatched (where applicable)	by 26 August 2015

(1)   3,718,236 Consideration Shares are expected to  be issued shortly following Admission pursuant to the put and call option arrangements and will be admitted to trading on AIM at that time.

Each of the times and dates set out above and mentioned elsewhere in this announcement may be subject to change at the absolute discretion of (i) the Company and (ii) any of Cenkos Securities plc, J.P. Morgan Cazenove and Oakley Capital Limited without further notice.

If any of the above times and/or dates change, the revised times and/or dates will be notified by an announcement through a Regulatory Information Service.

Disclaimer

Cenkos Securities plc ("Cenkos") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting exclusively for the Company in connection with the Proposals and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to this announcement or any matters referred to herein.

J.P. Morgan Securities plc ("J.P. Morgan Cazenove") which is authorised by the Prudential Regulatory Authority and regulated in the United Kingdom by the Financial Conduct Authority is acting exclusively for the Company in connection with the Proposals and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to this announcement or any matters referred to herein.

Oakley Capital Limited ("Oakley") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting exclusively for the Company in connection with the Proposals and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to this announcement or any matters referred to herein.

BNP Paribas Corporate Finance ("BNP Paribas") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting exclusively for the Company in connection with the Proposals and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to this announcement or any matters referred to herein.

Marwyn Capital LLP ("Marwyn") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting exclusively for the Company in connection with the Proposals and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to this announcement or any matters referred to herein.

This announcement is an advertisement and not an admission document and does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, the securities referred to in this announcement to any person in any jurisdiction, including the United States, Australia, Canada, the Republic of South Africa, or any member state of the European Economic Area (other than the United Kingdom) or in any other jurisdiction where to do so would constitute a violation of the relevant laws of that jurisdiction. Investors should not purchase or subscribe for any new Ordinary Shares referred to in this announcement except on the basis of information in the Admission Document published by the Company today in connection with the proposed Placing and the admission of the Enlarged Share Capital to AIM.

This announcement is only addressed to and directed at persons in the United Kingdom who are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EU, as amended by the 2010 PD Amending Directive (Directive 2010/73/EU)) ("Qualified Investors"). In addition, in the United Kingdom, this announcement is addressed and directed only at Qualified Investors who (i) are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), (ii) are persons who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, and (iii) to persons to whom it may otherwise be lawful to communicate it to (all such persons being referred to as "relevant persons"). Any investment or investment activity to which this announcement relates is available only to relevant persons in the United Kingdom that are Qualified Investors, and will be engaged in only with such persons. Other persons should not rely or act upon this announcement or any of its contents.

The information contained in this announcement is for background purposes only and does not purport to be full or complete.

This announcement may contain "forward-looking statements". All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, targets, proposed acquisitions and objectives are forward-looking statements. Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from results and performance expressed in, or implied by, these statements. These factors include but are not limited to those described in the Admission Document published by the Company today.

The information given in this announcement and the forward-looking statements speak only as at the date of this announcement. The Company and each of Cenkos, Oakley Capital and J.P. Morgan (the "Banks") and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Listing Rules or the Prospectus Rules published by the United Kingdom Listing Authority or other applicable laws, regulations or rules.

The Ordinary Shares have not, nor will they be, registered under the US Securities Act of 1933, as amended (the "US Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States or under the applicable securities laws of Australia, Canada, the Republic of South Africa or Japan. The Ordinary Shares may not be offered or sold directly or indirectly in or into the United States unless registered under the US Securities Act or offered in a transaction exempt from or not subject to the registration requirements of the US Securities Act or, subject to certain exceptions, into Australia, Canada, the Republic of South Africa or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, the Republic of South Africa,  Japan or any member state of the European Economic Area (other than the United Kingdom. The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

No representation or warranty, express or implied, is made by the Banks as to the contents of this announcement, or for the omission of any material from this announcement. The Banks have not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by the Banks for the accuracy of any information or opinions contained in this document or for the omission of any information from this announcement.

The contents of the Company's website do not form part of this announcement and no information from the website is included herein.

Definitions and Abbreviations

"Acquisition" means the proposed acquisition by the Group of the entire share capital of Telecable Capital Holding S.L.U. and the minority interests in its subsidiary Telecable de Asturias, S.A.;

"Adjusted EBITDA Margin" means adjusted EBITDA divided by total revenue;

"Admission" means the re-admission of the Enlarged Share Capital, including the Placing Shares, to trading on AIM and such admission becoming effective in accordance with Rule 6 of the AIM Rules;

"AIM" means the market of that name operated by the London Stock Exchange;

"AIM Rules" means together the AIM Rules for Companies and the AIM Rules for Nominated Advisers;

"Bidco" means Parselaya, S.L., a Spanish company, with registered office at Calle Zurbarán, número 9, local derecha, 28010, Madrid and holder of Spanish Tax Identification No. (N.I.F.) B87273272;

"Circular" means the circular containing the notice of the General Meeting to be dispatched today to Shareholders;

"Company" or "Zegona" means Zegona Communications plc, a public limited company incorporated in England and Wales with registration number 09395163;

"Completion" means completion of the Share Purchase Agreement in accordance with its terms;

"Consideration Shares" means 3,718,236 new Ordinary Shares to be issued to certain of the Vendors pursuant to the Share Purchase Agreement at the Placing Price;

"CREST" means the relevant system (as defined in CREST Regulations) for the paperless settlement of share transfers and the holding of shares in uncertificated form which is administered by Euroclear;

"CREST Regulations" means the UK Uncertificated Securities Regulations 2001 (as amended) including any modification or re-enactment thereof for the time being in force and such other regulations as are applicable to Euroclear and/or CREST;

"Directors" or "Board" means the board of directors of the Company;

"Enlarged Group" the Company and its subsidiaries following Completion;

"Enlarged Share Capital" means the issued Ordinary Share capital of the Company as it will

be following the issue of the Placing Shares;

"Euroclear" means Euroclear Bank S.A./N.V.;

"Existing Ordinary Shares" means the issued Ordinary Share capital of the Company as at the

date of the Admission Document, comprising 25,000,000 Ordinary Shares;

"Form of Proxy" means the form of proxy for use by Shareholders in connection with the General Meeting;

"General Meeting" means the general meeting of the Company convened for 11 a.m. on 13 August 2015 to vote on the Resolution and any adjournment thereof;

"Group" means the Company and its subsidiaries from time to time;

"Independent Directors" means Eamon O'Hare and Robert Samuelson, each of whom are considered independent for the purposes of the related party transaction as defined in the AIM Rules for Companies;

"Initial Admission" means the admission of the Existing Ordinary Shares to trading on AIM which became effective on 19 March 2015;

"J.P. Morgan Cazenove" means J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove;

"Loan Agreement"  means a senior secured loan agreement with, among others, Goldman Sachs International as the mandated lead arranger, the bookrunner and the original term loan lender and BNP Paribas as the agent, security agent and the revolving facility lender, pursuant to which a term loan in the amount of approximately €270,000,000 and a revolving credit in the initial amount of €20,000,000 will be available to Bidco and its subsidiaries;

"London Stock Exchange" means London Stock Exchange plc;

"New Ordinary Shares" means the Consideration Shares and the Placing Shares;

"Ordinary Shares" means ordinary shares of £0.01 each in the capital of the Company;

"Placee" means a person subscribing for Placing Shares under the Placing at the Placing Price;

"Placing" means the conditional placing of the Placing Shares and the shares to be issued to Wellington Management Company LLP at the Placing Price;

"Placing Agreement" means the Placing Agreement dated 25 July 2015 between (1) Cenkos; (2) J.P. Morgan Cazenove; (3) Oakley; and (4) the Company pursuant to which Cenkos, J.P. Morgan Cazenove and Oakley agree to act as agents for the Company to use their reasonable endeavours to assist with the placing of the Placing Shares at the Placing Price;

"Placing Price" means £1.50 per Placing Share;

"Placing Shares" means the 167,326,724 new Ordinary Shares to be issued by the Company pursuant to the Placing which includes 16,070,000 new Ordinary Shares to be issued by the Company to clients of Wellington Management Company LLP pursuant to a separate subscription agreement upon Admission;

"Prospectus Rules" means the prospectus rules of the UKLA made in accordance with section 73A of FSMA, as amended from time to time;

"QCA" means the Quoted Companies Alliance;

"Resolution" means the special resolution (to be proposed at the General Meeting) to, among other things, approve the Acquisition, authorise the Board to allot the New Ordinary Shares and disapply pre-emption rights in relation to the allotment of the New Ordinary Shares;

"Shareholder" means a holder of Ordinary Shares;

"Share Purchase Agreement" means the share purchase agreement dated 25 July 2015 between

the Company and the Vendors, in connection with the Acquisition;

"Subscription Agreement" means the Subscription Agreement dated 22 July 2015 between the Company and Wellington Management Company Limited (''Wellington'') pursuant to which clients of Wellington have agreed to subscribe for 16,070,000 new Ordinary Shares upon Admission, conditional on Admission taking place not later than 28 August 2015;

"Telecable" means Telecable de Asturias S.A;

"Telecable Group" means Telecable Capital Holdings S.L.U. and its subsidiaries; and

"Vendors" means CEP III Investment 18 S. á r.l., Liberbank, S.A., Mr. Carlos Cadarso Marqués, Mr. Antonio Retana García -Morán, Mr. Alfonso Oliva Rivero, Mr. Alejandro Martínez Peón, Mr. Jesús Pérez Iglesias, Mr. Francisco Javier Cañete Chalver, Mr. Juan Luis Acuña García, Mr. Juan Manuel Cofiño González.

Glossary

"B2B" A situation where a business makes a commercial transaction with another business.

"bundles" The products considered when referring to bundles as fixed-line telecommunications, fixed broadband, Pay TV and postpaid mobile.

"churn" Measure of the number of individuals terminating their contract with a telecommunications operator over a specific period of time.

"Ethernet" Ethernet is the most widely-installed standard local area network technology.

"pay television" Subscription-based television services.

"quad-play" Quad-play is the combination of four separate telecommunications and entertainment products, comprising television, broadband internet access, fixed-line telecommunications and mobile telecommunications marketed and sold as a single integrated package of services to customers.

 

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